DEXUS Property Group (ASX: DXS) · 2016-02-17 · FY13 FY14 FY15 3yr Avg (FY13-FY15) HY162 Return on Equity 11.2% 6.7% 11.5% 9.8% 12.0% Return on Equity1 67bps 54bps 53bps 50bps 49bps

DEXUS Property Group (ASX: DXS) ASX release

17 February 2016 2016 Half year results presentation

DEXUS Property Group provides its 2016 Half year results presentation. The property synopsis spreadsheet is also available on our website at www.dexus.com/synopsis For further information please contact: Investor relations Media relations

Rowena Causley T: +61 2 9017 1390 M: +61 416 122 383 E: [email protected]

Louise Murray T: +61 2 9017 1446 M:+61 403 260 754 E: [email protected]

About DEXUS DEXUS Property Group is one of Australia’s leading real estate groups, investing directly in high quality Australian office and industrial properties. With $21.1 billion of assets under management, the Group also actively manages office, industrial and retail properties located in key Australian markets on behalf of third party capital partners. The Group manages an office portfolio of 1.8 million square metres located predominantly across Sydney, Melbourne, Brisbane and Perth and is the largest owner of office buildings in the Sydney CBD, Australia’s largest office market. DEXUS is a Top 50 entity by market capitalisation listed on the Australian Securities Exchange under the stock market trading code ‘DXS’ and is supported by more than 32,000 investors from 20 countries. With more than 30 years of expertise in property investment, development and asset management, the Group has a proven track record in capital and risk management, providing service excellence to tenants and delivering superior risk-adjusted returns for its investors. www.dexus.com Download the DEXUS IR app to your preferred mobile device to gain instant access to the latest stock price, ASX Announcements, presentations, reports, webcasts and more.

DEXUS Funds Management Ltd ABN 24 060 920 783, AFSL 238163, as Responsible Entity for DEXUS Property Group (ASX: DXS)

DEXUS Property Group – [presentation title] Slide 1DEXUS Property Group – [presentation title] Slide 1

DEXUS PROPERTY GROUP2016 HALF YEAR RESULTS PRESENTATION – 17 FEBRUARY 2016

DEXUS Funds Management LimitedABN 24 060 920 783AFSL 238163 as responsible entity for DEXUS Property Group

DEXUS Property Group – 2016 Half Year Results Presentation and Appendices Slide 2

Group highlights

— Recent transactions

— Proposed IOF merger with DEXUS

Financial results

— Capital management

Property portfolio

Third party funds management

Development

Trading

Market outlook

Summary

Appendices

CONTENTS

Darren Steinberg, CEO

Alison Harrop, CFO

Ross Du Vernet, EGM Group Strategy, Transactions & Developments

Kevin George, EGM Office and Industrial

Craig Mitchell, COO

Darren Steinberg, CEO


GROUP HIGHLIGHTS – Delivering across key earnings drivers in HY16

1. Includes development and trading properties.2. DEXUS Wholesale Property Fund (DWPF) return post fees.3. Before tax.4. FFO contribution is calculated before Finance costs and Group corporate costs. 5. Towers Watson employee engagement survey 2015.

PROPERTY PORTFOLIO TRADINGFUNDS MANAGEMENT & PROPERTY SERVICES

5% FFO4 15% FFO480% FFO4

84% employee engagement score5

and a scalable platform that continues to attract talent

Maintained strength of DEXUS balance sheet with gearing of 29.5%

242,596sqmof space leased1

Achieved a one-year total return of

15.3%across total

DEXUS portfolio

11%increase in

FUM

14.8%DWPF

one-yeartotal return2

16.0%DEXUS Office Partnership

annualised unlevered total property return since inception

$63.3m trading profits

delivered

Sale of Erskine Park secures circa

$12m of FY17 trading profits3

Achieved leasing outcomes at three properties which will

contribute to trading profits over the next four years


100 Mount Street, North Sydney

Jointly acquired 50/50 by DEXUS and DWPF

Site cost of $41 million1

Total development cost $467.5 million2

41,163sqm premium office tower

Project expected to commence in July 2016 with staged completion in late 2018

Completion at an opportune time in the cycle

Building set to benefit from

— Improved amenity, including the Sydney Metro line

— Limited prime grade options for tenants in North Sydney market

36 George Street, Burwood3

Sold for $95 million

44% premium to book value

Achieved a 32% IRR on investment

RECENT PROPERTY TRANSACTIONS – North Sydney acquisition & Burwood sale

1. Excluding acquisition costs.2. Including site cost.3. Owned by DEXUS Office Partnership, in which DEXUS has a 50% interest.


Scrip and Cash Proposal is strongly aligned to DEXUS’s strategy and is a compelling proposition for IOF Unitholders and DEXUS Security holders

Portfolio benefits - combination of two high quality complementary portfolios

Synergy benefits - via improved margins and flexibility as well as capacity to unlock development and repositioning opportunities and increased scope to action portfolio leasing strategies for customers

Efficient transaction reduces value leakage - financially attractive merger that is accretive to Underlying FFO

Capital market benefits – increased global relevance for debt and equity investors seeking exposure to a large, high quality, diversified Australian office property portfolio

Stable, experienced and aligned management team – internalised management team with high level of employee engagement across more than 360 employees

Subject to the approval of IOF Unitholders at a meeting expected to be held on 8 April 2016

IOF MERGER WITH DEXUS


ACCC condition satisfied - Australian Competition and Consumer Commission (ACCC) has confirmed that it does not intend to conduct a public review of the Proposal

No facilitation agreement has been reached with Morgan Stanley

Working constructively with IOF Management and Independent Board of IOF to ensure seamless transition of IOF management should the Proposal become effective and be implemented

DEXUS has mobilised an integration team with a strong track record of on-boarding assets

DEXUS Property Group – [presentation title] Slide 6

FINANCIAL RESULTS

DEXUS Property Group – [presentation title] Slide 6DEXUS Property Group – 2016 Half Year Results Presentation and Appendices Slide 6


Business contributions to HY16 FFO 31 Dec 2015 31 Dec 2014 Change

Underlying FFO4 $m 260.6 240.3 8.4%

Trading profits (net of tax)5 $m 63.3 18.1 249.7%

Funds from Operations (FFO) $m 323.9 258.4 25.3%

FFO per security cents 33.4 28.5 17.1%

FINANCIAL RESULTS – Key financial metrics

1. AFFO is calculated in line with the Property Council of Australia definition and comprises PCA FFO and adjusted for: maintenance capex, incentives (including rent free incentives) given to tenants during the period and other items which have not been adjusted in determining FFO. Refer to slide 42 for a detailed breakdown.

2. Adjusted for cash and for debt in equity accounted investments.3. Pro-forma gearing excludes the proposed merger with IOF, which would increase gearing by a further 4ppt.4. ‘Underlying’ FFO contribution excludes Trading profits (net of tax).5. Trading profits generated less associated FFO tax expense.

Key financial performance metrics 31 Dec 2015 31 Dec 2014 Change

Adjusted Funds from Operations (AFFO)1 $m 230.7 188.7 22.3%

Distribution per security cents 23.05 19.68 17.1%

Statutory Net profit $m 797.5 257.8 209.3%

Other key metrics 31 Dec 2015 30 Jun 2015 Change

Gearing2,3 29.5% 28.5% +1.0ppt

NTA per security $7.25 $6.68 8.5%


31 Dec 2015$m

31 Dec 2014$m

Change$m

Change %

Office property FFO 272.3 262.8 9.5 3.6%

Industrial property FFO 52.5 52.0 0.5 1.0%

Total property FFO 324.8 314.8 10.0 3.2%

Management operations1 18.9 19.4 (0.5) 2.6%

Group corporate (16.0) (14.8) (1.2) 8.1%

Net Finance costs (66.9) (78.6) 11.7 14.9%

Other (0.2) (0.5) 0.3 60.0%

Underlying FFO2 260.6 240.3 20.3 8.4%

Trading profits (net of tax)3 63.3 18.1 45.2 249.7%

FFO 323.9 258.4 65.5 25.3%

Adjusted Funds from Operations (AFFO) 230.7 188.7 42.0 22.3%

Distribution payout (% AFFO) 96.7% 94.4% 2.3pts 2.4%

Distribution 223.1 178.2 44.9 25.2%

FINANCIAL RESULTS – Funds From Operations

1. ‘Management Operations’ income includes Development management fees.2. ‘Underlying’ FFO excludes Trading profits (net of tax).3. Trading profits generated less associated FFO tax expense.


Gross MER 31 Dec 2015 $m

31 Dec 2014$m

Group corporate (16.0) (14.8)

Asset management (4.7) (4.6)

A. Total corporate & AM (20.7) (19.4)

B. Closing FUM(balance sheet FUM only) 10,467 9,102

Gross MER = 2*A/B 40bp 43bp

C. Total closing FUM 21,053 18,338

Gross MER (on total FUM)2*A/C 20bp 21bp

FINANCIAL RESULTS – Management Expense Ratio (MER) and Return on Equity

HY16 MER down 3bps from HY15

1. Return on Equity is calculated as the growth in NTA per security plus the distribution paid/payable per security divided by the opening NTA per security.2. Return on equity for the six months ended 31 December 2015.

FY13 FY14 FY15 3yr Avg(FY13-FY15) HY162

Return on Equity 11.2% 6.7% 11.5% 9.8% 12.0%

Return on Equity1

67bps

54bps 53bps50bps 49bps

43bps41bps 40bps

20

25

30

35

40

45

50

55

60

65

70

FY12 HY13 FY13 HY14 FY14 HY15 FY15 HY16


CAPITAL MANAGEMENT – HY16 progress

1. Adjusted for cash and for debt in equity accounted investments at 31 December 2014. Pro-forma gearing is 33.3% post the acquisition of Lakes Business Park, Botany.

Improve diversification and length ofthe debt profile

Maintain an average cost of debt of circa 4.9% in FY16

Maintain conservative gearing

FY16 focus HY16 progress

Debt duration remains strong at 5.2 yearsIncreased diversification of debt facility mix

Achieved 4.9% average cost of debt in HY16 FY16 cost of debt expected to remain circa 4.9%

Gearing1 of 29.5% at 31 December 2015


1. Adjusted for cash and for debt in equity accounted investments at 31 December 2014. Pro-forma gearing is 33.3% post the acquisition of Lakes Business Park, Botany.1. Adjusted for cash and for debt in equity accounted investments and excludes the proposed IOF merger, which would increase gearing by a further 4ppt.



0

200

400

600

800

1,000

1,200

1,400

Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Jun-20+

Capital markets CPA MTNs Bank

1. Adjusted for cash and for debt in equity accounted investments and excludes the proposed merger with IOF, which would increase gearing by a further 4 ppt.

2. Weighted average across the period, inclusive of fees and margins on a drawn basis.3. Average for the period. Hedged debt (including caps) was 73% for six months to 31 December 2015 and 76% for 12 months to 30 June 2015.

$90m of Medium Term Notes issued via reverse enquiry at an average duration of nine years

DEXUS bought back 2.9m securities at pricing ranging from $7.055-$7.200

— On-market securities buyback was suspended on 7 December 2015 as a result of entry into the process agreement for the IOF Proposal

CAPITAL MANAGEMENT – HY16 update

Key metrics 31-Dec-15 30-Jun-15 Change

Gearing (look-through)1 29.5% 28.5% 1 ppt

Cost of debt2 4.9% 5.2% 30 bps

Duration of debt 5.2 years 5.7 years 0.5 yrs

Hedged debt (ex caps)3 64% 69% 5 ppt

S&P/Moody’s credit rating A-/A3 A-/A3

Debt maturity profile

Bank Facilities 46%

Commercial Paper 3%

MTN 19%

USPP 24%

144A 8%

Diversified mix of facilities


PROPERTY PORTFOLIO



1. Primarily driven by realised gains on industrial trading properties.

PROPERTY PORTFOLIO – Developments and Sydney portfolio drive returns

16.7%Industrial portfolio

one-year total return1

14.8%Office portfolio

one-year total return

Office portfolio valuesup $528.0m or 6.4%(up $635.7m for the 12 months)

Industrial portfolio valuesup $5.7m or 0.3%

(up $29.7m for the 12 months)

Returns for the 12 months to 31 December 2015

HY16 valuation uplifts

Developments boosted total returns, offsetting Perth market softness

Sydney CBD was the strongest performing portfolio, followed by the non-CBD markets including Parramatta

Disposals of 36 George Street, Burwood (stabilised) and 40 Market Street, Melbourne (trading) contributed 40 basis points to portfolio total return

15.4%13.2%

6.6% 8.0%4.4% 3.9%

-2.2% -0.1%

-15.5%

5.2%5.8%

8.4% 6.5%

6.8% 6.6%10.8%

6.9% 7.9%

21.4%19.7%

15.5% 14.8%

11.5% 11.0% 8.4%

6.8%

-8.7%

Development Sydney CBDOffice

Non-CBDOffice

Total DEXUSOffice

Portfolio

Brisbane CBDOffice

MelbourneCBD Office

CanberraRegion Office

Adelaide CBDOffice

Perth CBDOffice

Capital return Income return Total return

Office portfolio total return composition


DXS’s 100% interest up $3.1mor 7.5% to $44.3m

DXS’s 100% interest down $80.4mor 16.7% to $400.0m


PROPERTY PORTFOLIO – 40 properties independently valued in the period

5 Martin Place, Sydney


240 St Georges Terrace, Perth

175 Pitt Street, Sydney


2-4 Military Rd, Matraville


1 Farrer Place, Sydney


383-395 Kent Street, Sydney 385 Bourke Street, Melbourne Knoxfield Industrial Estate, VIC



por 7.5% to $44.3mor 16.7% to $400.0m

por 10.4% to $225.0m

por 15.0% to $257.5m



1. Driven by realised gains on industrial trading properties.

PROPERTY PORTFOLIO – Cap rates expected to tighten further

31 Dec 2015 Change from30 Jun 2015

DEXUS Office 6.30% 41bps

DEXUS Industrial 7.56% 21bps

Total DEXUS portfolio 6.50% 38bps

Capitalisation rates

0.0

2.0

4.0

6.0

8.0

10.0

Dec-95

Dec-97

Dec-99

Dec-01

Dec-03

Dec-05

Dec-07

Dec-09

Dec-11

Dec-13

Dec-15

Syd CBD Office 10 year bond%

Average Sydney CBD prime yields vs bond rates

Investment demand expected to remain solid as investors seek secure yields

Forecast Prime cap rates to tighten a further 12.5 to 25 basis points

Value growth positive but aligning more with income growth

Pricing supported by low interest rate yields

Current cap rate to bond spread is 2.6% versus 10-year average of 1.9%

Outlook


PROPERTY PORTFOLIO – HY16 progress

Reduce FY17 office lease expiries to 10.0%

Maintain >95% occupancy in office portfolio

Expect flat like-for-like income growth across combined DEXUS portfolio

Continue to focus on reducing incentives and undertake effective leasing deals


On target to achieve 95% occupancy at end FY16

FY17 office lease expiries reducedfrom 12.7% to 11.7%

(1.4)% like-for-like income movementacross the combined portfolio

Lower contribution of effective deals, marginally increased office portfolio incentives

DEXUS Property Group – 2016 Half Year Results Presentation and Appendices Slide 16DEXUS Property Group – 2016 Half Year Results Presentation and Appendices Slide 16


309-321 Kent Street, Sydney

7 leases over 15,286sqm, increasing occupancy2 to 92.3%


10 Eagle Street, Brisbane Grosvenor Place, Sydney



PROPERTY PORTFOLIO – Office: Leasing1 progress on key properties

45 Clarence Street, SydneyWaterfront Place, Brisbane

6 leases over 5,638sqm increasing occupancy2

from 91.1% at acquisition to 95.6%

1. Including Heads of Agreement.2. Occupancy by area.


PROPERTY PORTFOLIO – Office: Leasing transaction volumes up

97,935sqm Total office space leased1

53 renewals across 23,175sqm

131 new deals across 70,856sqm

14 development deals across 3,904sqm

198 leasing transactions

1. Including Heads of Agreement.

Take-up of fitted-suites has been strong across the Sydney CBD Prime grade portfolio


RE-LEASING SPREADSin line with incentive changes

LIKE-FOR-LIKE INCOMEas forecast

1.5% Face(0.3)% Effective

1.3% Face(2.7)% Effective

56% (FY15: 61%)RETENTION as forecast

Holding INCENTIVES

94.1%(June 2015: 95.3%)

17.2% Average incentives (FY15: 15.0%)

Secured 62 effective deals

4.4 years(FY15: 4.3 years)

OCCUPANCY reflects expected tenant movements

Maintaining WALE

PROPERTY PORTFOLIO – Office: Consistent portfolio performance

OFFICE


5.9%

2.8%

11.7%

9.4%

16.1%

10.5% 11.5%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Vacant FY16 FY17 FY18 FY19 FY20 FY21

PROPERTY PORTFOLIO – Office leasing improves expiry profile

Active approach to leasing focused on maximising cash flow

Reduced FY19 expiries from 20.0%1 to 16.1%, maintaining Sydney exposure to expected FY18-20 upside

Continued activity from smaller space users for shorter-term leasing deals

— Expectation that leases can be recalibrated on better terms in an improved market in FY18-20

Note: Key leasing risks boxes represent tenant; property; and percentage of office income.1. As at 30 June 2015.

FY19 Key leasing risksWoodside, 240 St Georges (5.1%)Lend Lease, The Bond (1.7%)HWT, 150 Southgate (1.4%)

FY18 Key leasing risksVIC Govt, 8 Nicholson (1.6%)Insurance Australia, 46 Colins (0.6%)Carnival, Victoria Cross (0.5%)

FY17 Key leasing risksCover-More, Victoria Cross (0.4%)Intern’l SOS, 45 Clarence (0.4%)SA Govt, 11 Waymouth (0.4%)

8.8%1

12.7%1

End FY16 target


25 Distribution Drive, Laverton North

Natures Dairy 15,662sqmwhole building

3 leases 18,017sqm, increasing occupancy2 to 76.1%

2-4 Military Road, Matraville 2 Alspec Place, Eastern Creek

Toll 16,915sqm, increasing occupancy2 to 100.0%

Fedex 18,013qm, increasing occupancy2 to 100.0%

PROPERTY PORTFOLIO – Industrial: Leasing re-setting portfolio

1. Including Heads of Agreement.2. By area.

Whicker Street, Gillman

144,661sqm Total industrial space leased1

19 renewals across 15,901sqm

28 new deals across 128,760sqm

47 leasing transactions


10.1% Average incentives (FY15: 10.8%)

Secured 17 effective deals

(3.0)% Face0.3% Effective

(4.9)% Face(6.8)% Effective

32% (FY15: 53%)

93.4%(June 2015: 92.4%)

4.6 years (FY15: 4.0 years)

PROPERTY PORTFOLIO – Industrial: Leasing drives occupancy improvement

INDUSTRIAL

INCENTIVES reduced

RE-LEASING SPREADS in linewith over-rented position

LIKE-FOR-LIKE INCOMEas forecast

RETENTION as forecast

OCCUPANCY increased

WALE increased


THIRD PARTY FUNDS MANAGEMENT



THIRD PARTY FUNDS MANAGEMENT – HY16 progress

Deliver on third party clients’ investment objectives

Secure pre-commitments for third party development projects

Drive performance in the third party portfolios through active leasing


Pre-commitments secured at Gateway in Sydney, and Quarry at Greystanes

DWPF settled on acquisition of Waterfront Place and divested three non-core properties

Achieved an average one-year total return of 15% across all funds



$508mValuation uplift across platform2

($711m over the past 12 months)

DWPFoutperformedbenchmark over all

periods

1. Compared to 30 June 2015.2. Total third party funds management platform.3. Includes $718m uncommitted third party development pipeline.4. Mercer IPD Post Fee Net Asset Weighted Index (Net Return, Net Asset weighted).

THIRD PARTY FUNDS MANAGEMENT – Delivering on clients’ objectives

Third party funds under management

increased 11%1

Leased

193,229sqmof space across platform2

$413mequity raised across

platform2

Growth of third party funds platform

$5.7bn

$10.6bn

0

2

4

6

8

10

12

Jun-12 Dec-15DWPF Australian Mandate US Mandate Capital Partners

+86%

DWPF performance against benchmark

Total return(post fees)

One year

Three years

Fiveyears

DWPF 14.8% 10.8% 10.3%

Benchmark4 12.7% 10.2% 9.6%

Variance +2.1% +0.6% +0.7%

$2.1bn3

Development pipeline($1.5bn remaining

spend3)

DEXUS Office Partnership

achieved a16.0% p.a. unlevered property

return since inception


THIRD PARTY FUNDS MANAGEMENT – Management operations1 profit

FY12 FY13 FY14 FY15 FY16

Actual Forecast

$17.9m$20.8m

$27.9m

$37.9m

Circa $45m

Management operations profit has increased from additional capital partners and expanded business

— Annuity-style revenue stream

— No performance fees

— Alignment of interests via DEXUS co-ownership in direct properties

1. Funds management and property services (including development management fees).


DEVELOPMENT AND TRADING



DEVELOPMENT AND TRADING – Significant progress on pipeline

Progress industrial partnership developments

Deliver key office developments in Sydney, Perth and Brisbane

Progress the high priority opportunities in the trading pipeline


Final PC reached at 5 Martin Place, Sydney and Kings Square, Perth

Constructing industrial facilities for Toshiba,Reece Plumbing and Kathmandu

Announced sale of Erskine Park and new priority trading projects



DEVELOPMENT – DEXUS pipeline

$3.2bnGroup development pipeline

$1.1bnDEXUS portfolio

$2.1bnThird Party Funds

$865mcommitted projects

$551mremaining spend

$268muncommitted projects

Refer to slide 63 for full breakdown of

third party development pipeline

5.7% of balance sheet FUM allocated to development, trading and value-add at 31 December 2015

Refer to slide 61 for full breakdown of DEXUS development pipeline


TRADING – New priority projects enhance trading pipeline from FY17

Trading profit track record from FY12 to date

Trading profits in progress

Priority projects Sector Trading strategy Status

57-65 Templar Road, Erskine Park Industrial Develop and lease Exchanged

32 Flinders Street, Melbourne Car park Pursuing residential re-zoning Progressing

Lakes Business Park, Botany (South) Industrial Pursuing residential re-zoning Progressing

105 Phillip Street, Parramatta Office Develop and lease Secured HoA with Government Property NSW

79-99 St Hilliers Road, Auburn Industrial Rezone, lease and develop Secured HoA with Bunnings for warehouse and adjoining office

12 Frederick Street, St Leonards Mixed use Rezone, lease and develop Secured HoA with major tenant for long term lease

8properties

developed or repositioned and sold

$146.8mof trading profits2

delivered in 4 years

23.5%1average unlevered

project IRR achieved

6priority projects

Approx. $110maggregate trading profits2 to be delivered over the next 4 years

from FY17-20trading pipeline

enhanced

1. Calculated as an arithmetic average.2. Pre-tax.


MARKET OUTLOOK



-100

-50

0

50

100

150

200

250

Syd CBD Melb CBD Bris CBD Perth CBD

‘000sqm Prime Secondary

MARKET OUTLOOK – Nationally Prime space is benefiting from flight to quality

Net absorption by grade (CY15)

7.8% 10.1%

15.2%17.4%

7.8% 10.0%

16.1%

23.5%

0%

5%

10%

15%

20%

25%

Syd CBD Melb CBD Bris CBD Perth CBD

Jun-15 Dec-15 20yr average

Current vacancy vs long term average

Source: JLL Research, DEXUS Research and MSCI-IPD.

Net absorption in Prime buildings is far exceeding take-up in secondary

Flight to quality will accelerate take-up of new supply in FY16

Vacancy rates are at or below the long term average in Sydney and Melbourne

Significant new supply has been added in Brisbane and Perth over the past six months


-103 -132-64-138

-100-90

-25

36

259

12049

7.8%

8.6%

6.7%5.9%

-6%

-2%

2%

6%

10%

-300

-200

-100

0

100

200

300

FY15 FY16 FY17 FY18

‘000sqm

Total completions

Net demand

Stock Withdrawal

Vacancy (RHS)

Vacancy forecast atFeb-15 (RHS)

MARKET OUTLOOK – Sydney CBD vacancy to tighten quickly

DEXUS expectations

Source: DEXUS Research, JLL Research.

428,000sqm of supply

over the next 3 years

299,000sqm of withdrawals


215,000sqm of net absorption


8.5% of stock, around 1.5 times average

Barangaroo completion in FY17 followed by decline in supply in FY18

20% to be withdrawn for Sydney Metro

47% of withdrawals will be permanent

Withdrawal rate higher than previous decade average (~40,000sqm p.a.)

Comparable with 20 year historic average net absorption of 87,000sqm p.a.(ex Tech Wreck & GFC) (50,000sqm p.a. inc Tech Wreck & GFC)

Flight to quality above average take up in prime space

Vacancy to increase in FY16Barangaroo effect

Past 12 months +208,000 net absorption of Prime

Includes +63,000sqm net movement (secondary to prime)

259,000sqm of supply (81.3% committed)

Limited supply FY17-18 will see vacancy quickly reduce

FY18 Vacancy

rate below 6.0%


MARKET OUTLOOK – Sydney withdrawals to increase due to future infrastructure

Metro rail extension

Light rail

Westconnex (road)

Proposed harbour crossing (road)

Victoria Cross Station 16,617sqm

189 Miller Street 3,123



Martin Place Station 45,710sqm

55 Hunter Street -13,644

5 Elizabeth Street -8,384

12 Castlereagh Street -7,341

39 Martin Place -16,341

Pitt Street Station 13,021sqm

175 Castlereagh Street -11,848

125 Bathurst Street -670

131 Bathurst Street -503


SUMMARY



FUNDS MANAGEMENT & PROPERTY SERVICES

Organic growth supported by $2.1bn development pipeline1

SUMMARY – Outlook

PROPERTY PORTFOLIO

Focus on increasing occupancy >95%

TRADING

Pipeline enhancedwith priority projects to FY20

80%- 90% FFO2 10%-20% FFO2

1. Remaining spend on development pipeline is $1.5bn, including $718m uncommitted projects.2. FFO contribution is calculated before Finance costs and Group Corporate costs.

Key areas of the business are in a strong position


1. Barring unforeseen circumstances guidance is supported by the following assumptions: circa 1% like-for-like income growth across the DEXUS Office portfolio and circa 7% decline in like-for like income across the DEXUS Industrial portfolio, weighted average cost of debt of 4.9%, trading profits of $63m net of tax, Management Operations FFO of circa $45m (including third party development management fees), and excluding the IOF Proposal and any further transactions.

Lower for longer domestic interest rate cycle to continue in an uncertain economic environment

— Office market fundamentals in Sydney expected to continue to improve

— Investment demand strength retained as investors seek the defensive nature of property

Maintain market guidance1 for the 12 months ending 30 June 2016

— FFO per security growth of 5.5-6.0%

— Payout in line with free cash flow to deliver growth in distribution per security of 5.5-6.0%

SUMMARY


APPENDICES



Group highlights

— DEXUS today

IOF merger with DEXUS

Financial results

— Reconciliation to statutory net profit

— Underlying FFO growth drivers

— Management operations profit

— Cash flow reconciliation

— Interest reconciliation

— Change in net tangible assets & revaluations

— Direct property portfolio movements

Capital management

— HY16 overview

— Interest rate hedging profile

CONTENTS

Portfolio results

— Office portfolio

— Industrial portfolio

— Office & Industrial portfolio sustainability metrics

— DEXUS developments completed and pipeline

— DEXUS committed developments & portfolio capex

— DEXUS uncommitted developments

Third party funds management development pipeline

Transactions

— Trading versus non-trading opportunities

Trading

Market outlook

Exchange rates & securities used in statutory accounts

Glossary

Important information


GROUP HIGHLIGHTS – DEXUS today

DEVELOPMENT PIPELINE (future growth )

DEXUSPORTFOLIO

$10.5bn

DEXUS owned and managed portfolio of Australian office

and industrial properties

OFFICE: $8.8bn

INDUSTRIAL: $1.7bn

DEVELOPMENT: $1.1bn

THIRD PARTY FUNDS PORTFOLIO

$10.6bn

Management of a diverse portfolio of office, industrial and

retail properties on behalf of third party partners and funds

OFFICE: $5.3bn

INDUSTRIAL: $1.2bn

DEVELOPMENT: $2.1bn

TOTALGROUP PORTFOLIO

$21.1bn

OFFICE: $14.1bn

INDUSTRIAL: $2.9bn

DEVELOPMENT: $3.2bn

RETAIL: $4.1bn RETAIL: $4.1bn


Proposal to merge with Investa Office Fund (IOF) arose asresult of an unsolicited approach from the advisors to theIndependent Board Committee (IBC) of Investa Listed FundsManagement Limited (ILFML)

Following completion of due diligence, on 18 December 2015DEXUS and ILFML each announced that they had entered intoa binding Implementation Agreement (MIA) under whichDEXUS will seek to acquire all of the units in IOF

The IBC of ILFML has resolved that they intend tounanimously recommend that IOF Unitholders vote in favourof the Proposal, in the absence of a superior proposal andsubject to an Independent Expert concluding that theProposal is in the best interests of IOF Unitholders

Implementation will be via an IOF informal trust scheme andrequires, among other things, the approval of IOFUnitholders at a meeting on 8 April 2016

IOF MERGER WITH DEXUS – Background

Proposed key timeline of events

First judicial advice hearing 8 March 16

NOM despatched to IOF Unitholders 9 March 16

Cut off for receipt of proxies 10am, 6 April 16

IOF Unitholder meeting to approve the Proposal 10am, 8 April 16

Second judicial advice hearing 12 April 16

Effective date 13 April 16

Implementation date 29 April 16


Reference Item 31 Dec 2015$m

31 Dec 2014$m

Statutory AIFRS net profit after tax 797.5 257.8

A Investment property and inventoryA2 (Gains)/losses from sales of investment property (15.0) 1.3A3 Fair value gain on investment property (533.7) (109.3)C Financial instrumentsC2 Fair value (gain)/loss on the mark-to-market of derivatives (21.2) 20.2D Incentives and rent straight-liningD1 Amortisation of fit out incentives 22.8 21.1D2 Amortisation of lease fees 3.9 3.0D4 Amortisation of rent-free periods 23.5 19.3D5 Rent straight-lining (4.0) (4.5)E TaxE1 Non-FFO deferred tax benefits 7.9 9.0F Other unrealised or one-off ItemsF1 Recycling of foreign currency translation reserve (FCTR) - 2.1F2 Other unrealised or one-off items 42.2 38.4FFO 323.9 258.4G Maintenance and leasing capexG1 Maintenance capital expenditure (34.8) (20.3)G2 Cash incentives and leasing costs paid (30.7) (21.9)G3 Rent free incentives (27.7) (27.5)AFFO 230.7 188.7Distribution 223.1 178.2AFFO Payout ratio (Distribution/AFFO) 96.7% 94.4%

FINANCIAL RESULTS – Reconciliation to statutory net profit

The table below shows the breakdown of DEXUS’s FFO and AFFO which is in accordance with the PCA definitionoutlined in the PCA white paper “Voluntary best practice guidelines for disclosing FFO and AFFO”


FINANCIAL RESULTS – Underlying FFO growth drivers

8.4% growth

* ‘Management Operations’ income includes Development management fees.

Property portfolio FFO Management operations Financing

$m

240.3

260.6

10.0

11.7 0.3

0.5

1.2

200

220

240

260

280

HY15 UnderlyingFFO

Property portfolioFFO

Mgmt operations* Net finance costs Corporate costs Other HY16 UnderlyingFFO

Other


FINANCIAL RESULTS – Management operations profit

1. Comprises property management salaries of $8.0m and management operations expenses of $13.4m.2. Net profit from Development & Trading comprises $90.4m from trading ($63.3m net of tax).

Management operations profit

HY16 ($m) Property Mgmt Funds Mgmt Mgmt Operations Dev’t & Trading2

Revenue 26.8 21.8 48.6 207.7

Operating expenses1 (21.4) (8.3) (29.7) (3.0)

Cost of sales —trading - - - (114.3)

Total operating expenses (21.4) (8.3) (29.7) (117.3)

HY16 net profit 5.4 13.5 18.9 90.4

HY16 margin 20% 62%

HY15 margin 30% 59%


FINANCIAL RESULTS – Cash flow reconciliation

31 Dec 2015$m

31 Dec 2014$m

Cash flow from operating activities 438.5 352.6

add back: payment for inventory acquisition and capex 22.4 21.6

less: cost of sale of inventory (114.3) (84.0)

add: proceeds from sale of Rosebery received in advance 1.7 (12.1)

add: receivable from sale of Mascot 5.0 -

add: tax on sale of 88 Shortland Street 4.5 -

less: tax on trading profits not yet paid (27.1) (2.3)

add back: capitalised interest 3.7 3.2

adjustments for equity accounted distributions (38.2) (53.4)

other working capital movements 4.5 8.4

Adjusted cash flow from operating activities 300.7 234.0

Rent free income 27.7 27.5

Depreciation and amortisation (incl. deferred borrowing costs) (4.5) (3.1)

FFO 323.9 258.4

Less: maintenance capex and incentives (93.2) (69.7)

AFFO 230.7 188.7

less: gross distribution (223.1) (178.2)

Cash surplus 7.6 10.5


31 Dec 2015$m

31 Dec 2014$m

Total statutory finance costs 73.3 126.3

Less: unrealised interest rate swap MTM loss1 (10.3) (51.2)

Add: finance costs attributable to investments accounted for using the equity method 4.4 4.0

Net finance costs for FFO 67.42 79.1

Add: interest capitalised 3.9 3.2

Gross finance costs for cost of debt purpose 71.3 82.3

1. Net fair value loss of interest rate swap of $16.5m (per note 2) includes realised interest rate swap expense of $6.2m and unrealised interest rate swap MTM loss of $10.3m.

2. Excludes interest income of $0.5m.

FINANCIAL RESULTS – Interest reconciliation


$m $ps

Investment portfolio Valuation change

$m

Cap rate

%

% of portfolio

Opening net tangible assets (30 Jun 15) 6,485 6.68 DEXUS office portfolio 528 6.30 84%

Revaluation of real estate 534 0.55 DEXUS Industrial portfolio 6 7.56 16%

Retained earnings1 101 0.10 Total DEXUS portfolio 534 6.50

Amortisation of tenant incentives2 (46) (0.05)

Buyback of equity (20) -

Fair value movements3 (33) (0.03)

NTA changes in comprehensive income 536 0.57

Closing net tangible assets (31 Dec 15) 7,021 7.25

1. Represents HY16 FFO less distributions.2. Includes rent straight-lining.3. Primarily includes fair value movements of derivatives and interest bearing liabilities, deferred tax,

gain from sale of investment properties, movement in reserves and other.

FINANCIAL RESULTS – Change in net tangible assets and revaluations


Office1

$mIndustrial1

$mDEXUS total1

$mTrading assets2

(inventory)

Opening direct property 7,822 1,711 9,533 275

Lease incentives3

52 6 58 -

Maintenance capex 25 10 35 -

Acquisitions 347 - 347 -

Transfer to inventories4

- - - 80

Developments5

116 43 159 22

Disposals6

(33) (120) (153) (114)

Revaluations 528 6 534 -

Amortisation (45) (5) (50) -

Rent straightlining 3 1 4 -

Closing balance at the end of the period 8,815 1,652 10,467 263

1. Includes DEXUS’s share of equity accounted investments.2. Assets held by DXO are also included in Office, Industrial and DEXUS total amounts.3. Includes rent free incentives.4. Transfers to inventories are eliminated within the Office, Industrial and DEXUS total amounts.5. Includes capitalised interest.6. At book value.

FINANCIAL RESULTS – Direct property portfolio movements


Key metrics 31 Dec 2015 30 June 2015

Total debt1 3,273m $2,774m

Cost of debt2 4.9% 5.2%

Gearing (look-through)3 29.5% 28.5%

Headroom (approximately)4 $0.4bn $0.8bn

Debt duration 5.2 years 5.7 years

S&P/Moody’s rating A-/A3 A-/A3

Covenant gearing (covenant5 <55%) 28.4% 27.2%

Interest cover (covenant5,6 >2.0x) 4.9x 4.8x

Priority debt (covenant5 <30%) 0% 0%

1. Total debt does not include $183m of debt in an equity accounted investment.2. Weighted average for the period.3. Adjusted for cash and for debt in equity accounted investments.4. Undrawn facilities plus cash. Excluding forward start commitments.5. As per public bond covenants.6. Look-through interest cover is 4.6x.

CAPITAL MANAGEMENT – HY16 overview


Hedging profile 31 Dec 2015 30 June 2015

Average amount of debt hedged1 73% 76%

Average amount of debt hedged excluding caps 64% 69%

Weighted average interest rate on hedged debt2 3.5% 3.7%

Weighted average fixed & floating rate3 4.9% 5.2%

Weighted average maturity of interest hedges 3.9 years 3.8 years

CAPITAL MANAGEMENT – Interest rate hedging profile

1. Average amount hedged for the period (including caps).2. Including fixed rate debt (without credit margin).3. Including fees and margins.

0.0%

2.0%

4.0%

6.0%

8.0%

-

500

1,000

1,500

2,000

2,500

FY16 FY17 FY18 FY19 FY20

Hedge maturity profile

Net fixed debt Interest Rate Caps Interest Rate Swaps Weighted Average Hedge Rate


NSW 60.5%

VIC 13.2%

QLD 15.8%

WA 7.9%

SA 1.4% ACT 1.1%

Premium Grade 37.2%

A Grade 54.0%

B Grade 4.5%

Office Park 2.0%

Land 0.1% Carpark 2.1%

PORTFOLIO RESULTS – Office portfolio diversification

DEXUS office by locationDEXUS office by asset type


PORTFOLIO RESULTS – Office lease expiry profile at 31 December 2015

5.9%

2.8%

11.7%

9.4%

16.1%

10.5% 11.5%

5.7%

2.5%

11.6% 10.7%

17.5%

11.8% 11.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Vacant FY16 FY17 FY18 FY19 FY20 FY21By Income By Area


PORTFOLIO RESULTS – Office lease expiry profiles at 31 December 2015

DEXUS Office1 Value ($m)

Cap rate(%)

Yield(%)

Sydney CBD 4,482.0 5.8 5.7

Sydney Suburban 837.8 7.4 7.4

Melbourne CBD 1,129.3 6.6 6.5

Brisbane CBD 1,159.5 6.5 6.8

Perth CBD 699.7 7.0 8.5

1. Includes stabilised properties only. Excludes Adelaide and Canberra office properties.

5.5% 4.9%

12.7% 13.3%

21.2% 22.4%

7.1% 5.2% 3.1%

11.5% 11.5%

21.8% 25.9%

7.7%

0%

10%

20%

30%

Available FY16 FY17 FY18 FY19 FY20 FY21

Sydney Suburban Office portfolio

By Income By Area

7.8%

3.2%

9.4%

18.4% 14.9%

8.2%

21.4%

9.8%

3.2%

9.3%

23.7%

17.0%

4.9%

16.8%

0%

5%

10%

15%

20%

25%


Melbourne CBD Office portfolio

By Income By Area

7.3%

2.7%

12.0%

7.8%

11.6% 12.0% 11.9%

5.7%

2.8%

11.5%8.5%

14.0% 13.9%

12.2%

0%

5%

10%

15%


Sydney CBD Office portfolio

By Income By Area

3.6% 3.2%

10.9%

3.3% 6.4%

4.4% 5.1%

3.8% 2.6%

7.7%

3.5% 6.4%

4.6% 6.0%

0%

5%

10%

15%


Brisbane CBD Office portfolio

By Income By Area

0.7% 0.7% 2.7% 9.8%

50.8%

4.1% 12.3%

0.7% 0.9% 2.9% 10.0%

48.0%

4.4% 13.4%

0%

20%

40%

60%


Perth CBD Office portfolio

By Income By Area


Office tenant S&P rating % of income1

Woodside Energy BBB+ positive 4.0%

Commonwealth of Australia AAA Stable 3.9%

Wilson Parking Australia Not rated 3.4%

Rio Tinto A- negative 2.8%

Commonwealth Bank of Australia AA- stable 2.6%

State of NSW AAA negative 2.0%

Deloitte Services Pty Ltd Not rated 1.7%

Lend Lease Management Services BBB- stable 1.5%

State Of Victoria AAA stable 1.3%

The Herald & Weekly Times 1.2%

1. 31 December 2015 fully leased DEXUS portfolio passing income.

PORTFOLIO RESULTS – Office portfolio top 10 tenants

Diversity of office tenants by income

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Other

Tourism

Superannuation

Electricity, gas, water and waste service

Employment Placement and Recruitment Services

Food and beverage manufacturing

Engineering Consultancy Services

Healthcare and social assistance

Investment banks

Rental & Real Estate services

Insurance

Other finance

Construction services

Business Services Other

Metal ore mining

Federal Government

State Government

Accounting services

Banks & building societes

Oil and Gas

Legal services

Information media and telecommunications


NSW 57.5%

QLD 4.9%

VIC 36.0%

SA 1.6% Industrial estate 35.7%

Distribution centre 24.1%

Business park 29.1%

Data centre 3.5%

Land 7.6%

PORTFOLIO RESULTS – Industrial portfolio diversification

DEXUS industrial by locationDEXUS industrial by asset type


PORTFOLIO RESULTS – Industrial lease expiry profile at 31 December 2015

6.6%

3.1%

15.4%

10.2%

12.8%

8.9% 8.7% 7.8%

1.9%

15.3%

8.9% 10.0%

8.5% 8.6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%


By Income By Area


PORTFOLIO RESULTS – Industrial lease expiry profiles at 31 December 2015

DEXUS Industrial1

Value ($m)

Cap rate(%)

Yield(%)

Sydney 733.2 7.5 6.6

Melbourne 567.0 7.8 7.4

Brisbane 55.8 7.5 8.1

Adelaide 25.9 11.0 12.8

1. Includes stabilised properties only.

0.0%

33.9%

0.0%2.9% 1.3%

10.0% 8.9%7.9% 10.0% 10.3%

4.4%8.2% 4.0%

7.4%

0%

10%

20%

30%

40%


Brisbane Industrial portfolio

By Income By Area

5.4%

15.4%

10.4%

14.4%

10.5%11.8%

3.5%5.4%

19.0%

8.6%11.3% 10.9%

14.1%

3.8%

0%

5%

10%

15%

20%


Sydney Industrial portfolio

By Income By Area

7.6%

13.1%11.3%

8.5% 8.3%

4.6%

13.5%

7.9%10.0% 10.3%

4.4%

8.2%

4.0%

7.4%

0%

5%

10%

15%


Melbourne Industrial portfolio

By Income By Area

22.1%19.8%

5.3%

47.0%

0.0%5.8%

0.0%

23.9%20.0%

5.2%

44.7%

0.0%6.2%

0.0%0%

10%

20%

30%

40%

50%


Adelaide Industrial portfolio

By Income By Area


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Other

State Government

Scientific and Technical Services

Postal and courier pick-up and delivery services

Business Services Other

Retailing (non-food)

Information media and telecommunications

Pharmaceutical wholesaling

Road, rail, water, air and space transport

Construction services

Transport support services

Other manufacturing

General wholesaling

Warehousing and storage services

Industrial tenant % of income1

Wesfarmers Limited 1.2%

AWH 0.6%

IBM Australia 0.5%

Visy Industry Packaging Pty Ltd 0.4%

Blackwoods 0.4%

Fedex 0.4%

Fonterra Co-Operative Group 0.3%

Toll Transport Pty Ltd 0.3%

Agility Logistics 0.2%

Reece 0.2%

1. 31 December 2015 fully leased DEXUS portfolio passing income.

PORTFOLIO RESULTS – Industrial portfolio top 10 tenants

Diversity of industrial tenants by income


PORTFOLIO RESULTS – Office and Industrial portfolio sustainability metrics

DEXUS office portfolio

NABERS Energy average rating

NABERS Water

average rating

Dec 12 4.71 3.51

Dec 13 4.81 3.51

Dec 14 4.62 3.52

Dec 15 4.72 3.82

Note: Data in charts is unaudited.1. NABERS ratings on a like-for-like basis.2. NABERS ratings on an absolute basis.3. Water consumption is primarily under the control of tenants, with the increase in 2014 and 2015 due to tenant demand for water at Kings Park Industrial Estate.

0 stars

0.5 stars

1 stars

1.5 stars

2 stars

2.5 stars3 stars

3.5 stars

4 stars

4.5 stars

5 stars

5.5 stars

6 stars

609.0

379.9

133.7

76.7

FY08 2008 2009 2010 2011 2012 2013 2014 2015

Scop

e 1

& 2

GH

G E

mis

sion

s k

g CO

2-e/

sqm

Ener

gy In

tens

ity

(MJ/

sqm

)

DEXUS Office Energy and GHG Emissions Intensity

37.6% energy intensity reduction42.7% emissions intensity reduction

33.0

19.9

8.3

4.3

FY08 2008 2009 2010 2011 2012 2013 2014 2015

Scop

e 1

& 2

GH

G E

mis

sion

s k

g CO

2-e/

sqm

Ener

gy In

tens

ity

(MJ/

sqm

)

DEXUS Industrial Energy and GHG Emissions Intensity

39.6% energy intensity reduction47.4% emissions intensity reduction

855.4

643.6

FY08 2008 2009 2010 2011 2012 2013 2014 2015

Wat

er In

tens

ity

(L/s

qm)

DEXUS Office Water Intensity

24.8% water intensity reduction

297.0347.8

FY08 2008 2009 2010 2011 2012 2013 2014 2015

Wat

er In

tens

ity

(L/s

qm)

DEXUS Industrial Water Intensity

17.1% water intensity increase

3

Office: NABERS Energy Ratings by Area


Pipeline Building areasqm1

Project costA$m2

Yield on cost %

Space leased%

Completion

Office5 Martin Place, Sydney, NSW 33,639 111 7.03% 96%3 Sep-15

Kings Square, Perth, WA 53,493 217 8.06% 100% Nov-15

Total office 87,132 328

Industrial

Supply Network at Quarry, NSW 7,900 15 7.50% 100% Oct-15

Quarry at Greystanes, NSW 1,831 4 7.20% 100% Nov-15

Total industrial 9,731 19

Total developments completed 96,863 347

1. At 100%.2. DEXUS interest in development cost.3. 5 Martin Place, Sydney office space is 96% committed and retail space is 71% committed.4. Practical completion expected in February 2016.5. Also included in DEXUS trading pipeline. 6. Development pipeline shows total estimated project cost and (est. cost to complete).

PORTFOLIO RESULTS – DEXUS completed developments and pipeline

FY16 FY17 FY18+

480 Queen Street, Brisbane4 $298m2 ($78m)

Existing committed industrial pipeline $213m2 ($129m) – (including Quarry, Quarrywest, Laverton North, Larapinta, Hemmant)

100 Mount Street, North Sydney $234m2 ($234m)

105 Phillip Street, Parramatta5 $120m2 ($110m)

DEXUS Industrial Estate, Laverton North $90m2 ($67m)

180 Flinders Street, Melbourne $154m2 ($154m)

12 Creek Street, Brisbane $24m2 ($24m)

Developments committedDevelopments uncommitted

DEXUS development pipeline6


Pipeline Building areasqm1

Project costA$m2,3

Yield on cost %

Leased%

Completion due

Office

480 Queen Street, Brisbane, QLD 56,754 298 7.0% 100% Early 2016

105 Phillip Street, Parramatta, NSW4 20,000 120 8.25-8.75% 100% n/a

100 Mount Street, North Sydney, NSW5 41,163 234 Circa 7.3% 15% Late 2018

Total office 117,917 652

Industrial

1 Litton Close, Greystanes, NSW 20,489 30 Circa 8.0% 100% Mid 2016

Quarrywest, Greystanes, NSW 90,580 62 Circa 8.0% 0% Mid 2018

Quarrywest Toshiba & Specs, Greystanes, NSW 36,375 30 Circa 8.0% 59% Mid 2016

Kathmandu, Laverton, VIC 25,650 26 Circa 7.4% 100% Mid 2016

Wrightson Seeds, Laverton, VIC 10,194 12 Circa 7.0% 100% Mid 2016

Radius Industrial Estate, Larapinta, QLD 22,950 13 Circa 8.7% 0% Early 2016

1 Anton Road, Hemmant, QLD 66,100 41 Circa 8.5% 0% Mid 2017

Total industrial 272,338 213

Total developments committed 390,255 865

1. At 100%.2. Including land.3. DEXUS interest in development cost.

DEXUS total portfolio capital expenditure Actual HY16 Estimated FY16

Maintenance capital expenditure $34.8m $60-70m

Cash incentives and leasing costs $30.7m $60-70m

Total capital expenditure $65.5m $120-140m

PORTFOLIO RESULTS – DEXUS committed developments and portfolio capex

4. Also in DEXUS trading pipeline.5. Acquired post 31 December 2015.


Pipeline Building area1

sqmProject est.2,3

$mEst. cost to completion

$m

Est. yield on est. project cost %

Office

180 Flinders Street, Melbourne, VIC 17,143 154 154 6.0-6.5%

12 Creek Street, Brisbane, QLD 5,000 24 24 9.0-9.5%

Total office 22,143 178 178

Industrial

DEXUS Industrial Estate, Laverton North, VIC4 87,443 90 67 7.5-8.0%

Total industrial 87,443 90 67

Total uncommitted 109,586 268 245

1. At 100%.2. Including land.3. DEXUS share.4. Stage 3 estimated cost includes cost of land sales and excludes Kathmandu facility which is now committed.

PORTFOLIO RESULTS – DEXUS uncommitted developments


$718mTotal uncommitted projects

$1.35bnTotal committed projects

$732mRemaining spend on committed projects

$2.1bn Third Party Development1 Pipeline

Committed projects FY16 FY17 FY18/19

Office - 4 properties $419m

Retail - 6 properties $224m

Industrial - 4 properties $90m

Remaining spend on committed Third Party projects

$732m

Remaining spend on committed projects in Third Party Funds

Uncommitted projectsfocused primarily on retail properties

1. Third party funds’ or partners’ share of development spend and including DEXUS third party funds’ or partners’ share of Westfield redevelopments.

THIRD PARTY FUNDS MANAGEMENT – Development pipeline


DEXUS acquisitions1 Purchase price $m

Interest Caprate

Settlementdate

193 Mary Street, QLD 7.0 50% 7% 30 Oct 15

100 Mount Street, NSW2 20.5 50% n/a Apr 16

Total 27.5

TRANSACTIONS

DWPF acquisitions Purchase price $m

Interest Caprate

Settlementdate

193 Mary Street, QLD 7.0 50% 7% 30 Oct 15

100 Mount Street, NSW2 20.5 50% n/a Apr 16

Total 27.5

1. Note that the acquisition of Waterfront Place was included in reported transaction metrics at DEXUS’s FY15 result. The acquisition settled in October 2015.

2. Acquired post 31 December 2015.

DEXUS divestments Sale price $m Interest Settlementdate

36 George Street, NSW 47.5 50% 13 Nov 15

57-65 Templar Road, NSW 50.0 100% Jul 16

Total 97.5

DWPF divestments Sale price $m Interest Settlementdate

2 Costello Place, NSW 14.8 100% 25 Sep 15

29-41 Lysaght Street, QLD 21.6 100% 14 Dec 15

Cannon Park, QLD 31.5 100% 23 Dec 15

Total 67.9

Other third party divestments

Sale price $m Interest Settlementdate

36 George Street, NSW 47.5 50% 13 Nov 15

Total 47.5


Reposition & Sell

Develop& Sell

Reposition/ Develop & Sell

50 Carrington Street, Sydney

40 Market Street, Melbourne

Lakes Business Park (Southern site)

Wacol, Brisbane

Laverton North, Melbourne

Erskine Park, Sydney

32 Flinders Street, Melbourne

105 Phillip Street, Parramatta

79-99 St Hilliers, Auburn

12 Frederick Street, St Leonards

Trading asset2

(inventory)Trading asset2

(inventory)Trading asset2

(transfer to inventory)3

Acquisitions1 Balance Sheet Assets

Activity / Strategy

Properties

Accounting Treatment

Origination

Divestment (non trading)

Lumley Centre, NZ

201 Kent Street, Sydney

36 George Street, Burwood

Investment property(no transfer to trading)

Type

Profit/loss on sale held in passive trust (DIT/DOT/DDF)

Reflected in NTA

Not recognised in FFO

Net profit/loss after tax in FFO4



Transferred at fair value

1. Assets or land acquired externally with the intention to sell for profit.2. Activities are undertaken in a tax paying entity (DXO).

TRANSACTIONS – Trading versus non-trading opportunities

3. Intention changed to significantly participate in profit from change of use (residential, mixed-use or retail), development and subsequent sale. Future use may be uncertain.

4. Profits will not be recognised in FFO on any previous impairment amounts.


TRADING – Track record since 2012

TRADING PROFITS DELIVERED - developed or repositioned and sold eight properties

Settlementdate

Property Sector Trading strategy

Sale price ($m)

Trading profit1

($m)Unlevered

project IRR

15 Jun 12 Lenore Drive, Erskine Park Industrial Develop 38.1 4.5 22.3%

12 Mar 14 57-101 Balham Road, Archerfield Industrial Reposition 24.5 0.8 9.4%

12 Mar 14 163-183 Viking Drive Wacol Industrial Reposition 38 3.2 14.6%

1 Jul 14 30 Distribution Drive, Laverton North Industrial Develop 9.5 1.0 16.3%

1 Dec 14 50 Carrington Street, Sydney Office Reposition 88 12.2 13.2%

22 May 15 40 Market Street, Melbourne Office Reposition 105.3 17.4 26.0%

21 Jul 15 5-13 Rosebery & 22-55 Rothschild Ave, Rosebery Industrial Reposition 190 91.8 49.9%2

31 Jul 15 154 O’Riordan Street, Mascot Industrial Reposition 32 15.9 36.7%2

Total $515.3m $146.8m 23.5%3

1. Pre-tax.2. Unlevered IRR and includes the weighted cost of debt at 5.0% for the duration of the project.3. Calculated as an arithmetic average.


TRADING – Case study: 105 Phillip Street, Parramatta

105 Phillip Street is a 4,500sqm car park site adjacent to 130 George Street, Parramatta

Identified an opportunity to develop an office tower at the rear of the combined site with a central courtyard/atrium

Transferred the site into inventory in 2013 and obtained development consent for a 25,000sqm office building

Submission made to Government Property NSW

Secured Heads of Agreement with Government Property NSW for a 12-year lease over 100% of the building and staged occupation commencing in March 2018

APPROACH

OUTCOMES SO FAR

Proposed application to Parramatta City Council.


TRADING – Case study: 79-99 St Hilliers Road, Auburn

The property is an older industrial estate spanning 3.5ha located 16km west of the Sydney CBD

Demand for the older format warehouse and office product was declining

Identified higher and better use to increase the site’s relevance to the market and capitalise on its prominent location

Transferred the estate into inventory during the period

Secured Heads of Agreement for lease with Bunnings for a full-scale Bunnings Warehouse and adjoining office spanning 19,300sqm to be redeveloped on a portion of the existing estate

DA was lodged in December 2015 including a subdivision proposal that will enable DEXUS to maximise the value of both portions of the site

APPROACH

OUTCOMES SO FAR


TRADING – Case study: 12 Frederick Street, St Leonards

12 Frederick Street, St Leonards is an industrial estate located across the road from Royal North Shore Private hospital

DEXUS identified substantially higher and better use potential for the site

DEXUS transferred the estate into inventory during the period

Secured Heads of Agreement for lease with a major tenant for a long term lease at a new facility to be developed on the site

Lodged rezoning Planning proposal for a mixed use complex over 70,000sqm

DEXUS APPROACH

OUTCOMES SO FAR


MARKET OUTLOOK – Industrial market supported by growth in demand


Rental growth vs state final demand

Industrial demand benefitting from solid economic growth in NSW and VIC

Activity supported by low interest rates and falling petrol prices

Retailers and transport/logistics providers are key occupiers

Increased take-up from growth sectors such as dairy and health/pharmaceutical

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

FY08 FY10 FY12 FY14 FY16 FY18

Net face rental growth (OWSyd) NSW Real final demand


MARKET OUTLOOK – Sydney CBD absorption increases when new supply is added

Sydney CBD net absorption by grade and total completions

Source: JLL Research, DEXUS Research.

-150

-100

-50

0

50

100

150

200

250

300

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

‘000sqm Prime net abs Secondary net abs Total new completions

340,000sqm 345,000sqm 205,000sqm

Prime net absorption over period

208,000sqm


MARKET OUTLOOK – Sydney CBD market has been stronger than predicted

Office demand for Sydney CBD - actual vs predicted

Vacancy rate by city – actual and predicted


Sydney CBD market has outperformed even DEXUS’s positive view for the period FY14-16

Actual demand likely to be c260,000 vspredicted 190,000sqm

Vacancy rate is tracking lower than predicted

As predicted

IT, education, health and business services have led demand

Employment growth has outweighed the effect of workplace changes

Flight to quality is absorbing prime space

Similarly, Melbourne has outperformed due to solid demand

Brisbane and Perth have underperformed due to weaker than expected state economies

-6%-4%-2%0%2%4%6%8%10%12%

-100

-50

-

50

100

150

200

FY10 FY11 FY12 FY13 FY14 FY15 FY16*

‘000sqm Actual demand Predicted Aug-13Actual vacancy RHS Predicted Aug-13

*Mid-year estimate for full year

7.8%10.1%

15.2%17.4%

0%

5%

10%

15%

20%

Sydney Melbourne Brisbane Perth

Predicted 1yr ago Prdicted 2yr ago Actual Jun-15

Note: Vacancy as at Dec-15: Syd 7.8%, Mel 10.0%, Bris 16.1%, Perth 23.4% (JLL)


MARKET OUTLOOK – Limited new Sydney supply from FY17 and substantial withdrawals

-80

-60

-40

-20

0

20

40

60

80

100

120In

tern

atio

nal T

ower

s Sy

dney

- T

ower

25

Mar

tin

Plac

e20

Mar

tin

Plac

eSt

ate

Thea

tre

& O

ffic

e To

wer

Inte

rnat

iona

l Tow

ers

Sydn

ey -

Tow

er 3

EY T

ower

- 2

00 G

eorg

e St

reet

Wes

tpac

Bui

ldin

gCa

rlto

n H

ouse

Spid

en H

ouse

Mr

Chri

stia

n15

1 Cl

aren

ce S

tree

tSt

Geo

rge

Bank

Bui

ldin

gAt

rium

130

Eliz

abet

h St

reet

Coca

-Col

a Am

atil

Build

ing

286

Suss

ex S

tree

tIn

tern

atio

nal T

ower

s Sy

dney

- T

ower

133

3 G

eorg

e St

reet

One

Wha

rf L

ane

55 M

arke

t St

reet

234

Suss

ex S

tree

tG

oldf

ield

s H

ouse

St J

ames

Cam

pus

Thak

ral H

ouse

285

Geo

rge

Stre

etRu

gby

Club

Aust

ralia

n Co

nsol

idat

ed P

ress

Bui

ldin

gFa

irfa

x H

ouse

Sydn

ey M

etro

Rai

lC2

- 4

9 H

icks

on R

oad

Dar

ling

Har

bour

Liv

e -

Dar

ling

Squa

reAu

sgri

d Bu

ildin

g55

Mar

ket

Stre

et33

1-33

7 Ke

nt S

tree

t29

9 El

izab

eth

Stre

etO

ne C

arri

ngto

n St

Dev

elop

men

tCl

aren

ce S

t Co

mm

erci

al T

ower

233

Cast

lere

agh

Stre

et51

-55

Pitt

Str

eet

Dep

t of

Edu

cati

on &

Tra

inin

g Bu

ildin

gD

ept

of P

lann

ing

Build

ing

60 M

arti

n Pl

ace

Lend

Lea

se C

ircu

lar

Qua

y si

te55

Pit

t St

reet

FY16 FY17 FY18 FY19 FY20 FY21

'000sqm Sum of Withdrawal Sum of Refub un-com Sum of Refub pre-com Sum of New un-com Sum of New pre-com

Source: DEXUS Research.


0

20

40

60

80

100

Finance &insurance

Businessserv.

Government Education Health &pharm.

Construction&

engineering

IT/Comms

‘000sqm 2013 2015

Traditional users Growth sectors

MARKET OUTLOOK – Solid office enquiry from growth sectors

Sydney CBD Lease enquiry by industry 2013 vs 2015

Source: Colliers International.


MARKET OUTLOOK – Sydney CBD office

Sydney CBD office market

Source: JLL Research actual & DEXUS Research forecast.

-9%

-6%

-3%

0%

3%

6%

9%

12%

-200

-150

-100

-50

-

50

100

150

200

250

FY06 FY08 FY10 FY12 FY14 FY16 FY18

‘000sqm

Net Absorption Net Supply Vacancy (RHS)

Recovery well underway with demand to remain firm FY16-FY17

Vacancy is sitting at 7.8% (Dec-15), well below the 10 year average

Vacancy to temporarily lift this year due to significant new supply

Positive demand and withdrawal of older stock to drive vacancy down in FY18

Sydney CBD office market At 31 Dec 2015

Total net lettable area 5.06 million sqm

Prime vacancy average 8.2%

DEXUS Sydney CBD exposure

Net lettable area 608,300

Number of properties 18

% of portfolio by value 53%

Occupancy by area 94.2%

Occupancy by income 93.5%

Weighted average lease expiry 4.5 years


MARKET OUTLOOK – Melbourne CBD office

Melbourne CBD office market

-2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

-50

-

50

100

150

200

250


‘000sqm

Net Absorption Net Supply

Solid demand supported by improving state economy and strong population growth

Tenant migration from the fringe to the CBD anticipated to continue

Vacancy to tighten over the medium-term due to muted supply

Melbourne CBD office market At 31 Dec 2015



DEXUS Melbourne CBD exposure









MARKET OUTLOOK – Brisbane CBD office

Brisbane CBD office market

-12%

-6%

0%

6%

12%

18%

-100

-50

-

50

100

150


‘000sqm


Demand has turned the corner with 4 quarters of positive demand

Demand to benefit from centralisation of tenants and improving economy

Supply high in short term, but to decline post FY17

Should benefit longer-term from significant withdrawals for residential conversion

Brisbane CBD office market At 31 Dec 2015



DEXUS Brisbane CBD exposure









MARKET OUTLOOK – Perth CBD office

Perth CBD office market

-10%

-5%

0%

5%

10%

15%

20%

25%

-100

-50

-

50

100

150

200

250


‘000sqm


Soft demand conditions as falling commodity prices and Chinese slowdown weighs on investment

Elevated levels of new supply to drive vacancy to circa 23%

Rents likely to weaken further

Perth's longer term prospects will be underpinned by rising exports and population growth

Perth CBD office market At 31 Dec 2015



DEXUS Perth CBD exposure









EXCHANGE RATES AND SECURITIES USED IN STATUTORY ACCOUNTS

Post consolidation equivalent amounts2 6 mths to31 Dec 2014

12 mths to30 June 2015

6 mths to31 Dec 2015

Average weighted number of securities1 905,531,797 915,462,824 969,319,156

Closing number of securities 905,531,797 970,806,349 967,947,692

31 Dec 2014 30 June 2015 31 Dec 2015

Closing rates for Statement of Financial Position USD 0.8202 0.7680 0.7286

Average rates for Statement of Comprehensive Income USD 0.8906 0.8367 0.7231

1. Used to calculate FFO per security.2. Where the number of securities held by a security holder following the consolidation resulted in a fraction of

a security, the fraction was rounded up to the nearest whole number.


GLOSSARYGLOSSARY

Distribution payout policy: Policy is to distribute in line with free cash flow.

Funds From Operations (FFO): FFO is in line with Property Council of Australia definition and comprises net profit/loss after tax attributable to stapled security holders calculated in accordance with Australian Accounting Standards and adjusted for: property revaluations, impairments, derivative and FX mark to market impacts, fair value movements of interest bearing liabilities, amortisation of tenant incentives, gain/loss on sale of certain assets, straight line rent adjustments, deferred tax expense/benefit, transaction costs, rental guarantees and coupon income.

Adjusted FFO (AFFO): AFFO is calculated in line with the Property Council of Australia definition and comprises PCA FFO and adjusted for: maintenance capex, incentives (including rent free incentives) given to tenants during the period and other items which have not been adjusted in determining FFO.

Gearing: Gearing is represented by Interest Bearing Liabilities (excluding deferred borrowing costs and including the currency gains and losses of cross currency swaps) less cash divided by Total Tangible Assets (excluding derivatives and deferred tax assets) less cash. Covenant gearing is the same definition but not adjusted for cash.

Gearing (look through): Represents Gearing defined above adjusted to include debt in equity accounted investments.

Portfolio value: Unless otherwise stated, portfolio value is represented by investment properties, inventories and investments accounted for using the equity method, and excludes cash and other assets.

Responsible Entity fees: In this presentation Responsible Entity fees are shown at cost following internalisation in Feb 08. This Responsible Entity fee expense and the corresponding management fee revenue are eliminated in the statutory financial statements as the management business is a wholly owned consolidated entity.

Securities on issue: FFO per security is calculated based on the weighted average number of DEXUS securities for the relevant period.

Weighted AverageLease Expiry (WALE): A measure in years of the average term to expiry of in-place rent. Includes vacancies.


IMPORTANT INFORMATION

This presentation is issued by DEXUS Funds Management Limited (DXFM) in its capacity as responsible entity of DEXUS Property Group (ASX:DXS). It is not an offer of securities for subscription or sale and is not financial product advice.

Information in this presentation including, without limitation, any forward looking statements or opinions (the Information) may be subject to change without notice. To the extent permitted by law, DXFM, DEXUS Property Group and their officers, employees and advisers do not make any representation or warranty, express or implied, as to the currency, accuracy, reliability or completeness of the Information and disclaim all responsibility and liability for it (including, without limitation, liability for negligence). Actual results may differ materially from those predicted or implied by any forward looking statements for a range of reasons outside the control of the relevant parties.

The information contained in this presentation should not be considered to be comprehensive or to comprise all the information which a DEXUS Property Group security holder or potential investor may require in order to determine whether to deal in DEXUS Property Group stapled securities. This presentation does not take into account the financial situation, investment objectives and particular needs of any particular person.

The repayment and performance of an investment in DEXUS Property Group is not guaranteed by DXFM, any of its related bodies corporate or any other person or organisation.

This investment is subject to investment risk, including possible delays in repayment and loss of income and principal invested.


DEXUS PROPERTY GROUP2016 HALF YEAR RESULTS PRESENTATION – 17 FEBRUARY 2016

DEXUS Funds Management LimitedABN 24 060 920 783AFSL 238163 as responsible entity for DEXUS Property Group

DEXUS Property Group (ASX: DXS) · 2016-02-17 · FY13 FY14 FY15 3yr Avg (FY13-FY15) HY162 Return on Equity 11.2% 6.7% 11.5% 9.8% 12.0% Return on Equity1 67bps 54bps 53bps 50bps 49bps

Documents